- This is the fifth and final article in our series on varying and enforcing s. 106 obligations. Last week, we looked at enforcing an s. 106 obligation by way of injunction. This week, we mop up some miscellaneous matters by looking at money claims and other dispute resolution.
- 106(1) of the Town and Country Planning Act 1990 (“TCPA 1990”) provides that
106.— Planning obligations
(1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to in this section and sections 106A to 106C as “a planning obligation” ), enforceable to the extent mentioned in subsection (3)—
(a) restricting the development or use of the land in any specified way;
(b) requiring specified operations or activities to be carried out in, on, under or over the land;
(c) requiring the land to be used in any specified way; or
(d) requiring a sum or sums to be paid to the authority (or, in a case where section 2E applies, to the Greater London Authority) on a specified date or dates or periodically.
(3) Subject to subsection (4) a planning obligation is enforceable by the authority identified in accordance with subsection (9)(d)—
(a) against the person entering into the obligation; and
(b) against any person deriving title from that person.
(5) A restriction or requirement imposed under a planning obligation is enforceable by injunction.
(6) Without prejudice to subsection (5), if there is a breach of a requirement in a planning obligation to carry out any operations in, on, under or over the land to which the obligation relates, the authority by whom the obligation is enforceable may—
(a) enter the land and carry out the operations; and
(b) recover from the person or persons against whom the obligation is enforceable any expenses reasonably incurred by them in doing so.
(11) A planning obligation shall be a local land charge and for the purposes of the Local Land Charges Act 1975 the authority by whom the obligation is enforceable shall be treated as the originating authority as respects such a charge.
- As is well known, whether made unliterally or by agreement a s. 106 obligation is primarily enforceable as a contract: (though, of course, unlike a normal contract s. 106(3) provides an exception to the doctrine of privity). Although s. 106(5) and (6) specifically refer to injunctions and a local authority’s own powers of entry, and s. 106(11) provides for charging the land, the ordinary remedies for breach of contract are available: Avon CC v Millard (1985) 50 P. & C.R. 275, 279.
- Whether a claim for damages can be pursued will depend on the obligation breached. However, (as noted last week), there is a long line of authority that it will be difficult for a planning authority to show any measurable loss (one of the reasons damages are not adequate an adequate remedy and an injunction should be preferred). See, e.g., Avon CC at p. 279. As noted last week, in Newham LBC v Ali  1 W.L.R. 2743,  Dyson LJ said that
It is common ground that damages will usually not be an adequate remedy in the event of a breach of a planning obligation. A local planning authority will rarely be able to point to a loss measurable in money terms that it has suffered as a result of such a breach.
- “Rarely” of course does not mean never. While it is the case that damages cannot adequately compensate for refusing to cease operations on an agreed date (Avon CC) or remove works (Newham), recoverable loss may well be measurable in other cases, depending on the obligation.
- However, any obligation to pay a specified financial sum can be pursued as a debt. This must be undertaken (and defended) on the basis of ordinary contractual principles. In such actions, matters of interpretation are generally resolved in line with the ordinary principles of construction, making appropriate adjustments if the s. 106 is a unilateral undertaking (R (Robert Hitchens Ltd) v Worcestershire CC  J.P.L 373, -). Potential defences we have seen include that, properly interpreted, the s. 106 obligation makes payment of a sum by the developer conditional on an action by the authority, and that condition has not arisen.
- Planning challenges (e.g. that the obligation is pointless, for example) in such debt claims will generally be given short shrift. For example, in R (Renaissance Habitat Ltd) v West Berkshire DC  J.P.L 1209, Renaissance Habitat Ltd sought a judicial review of West Berks DC’s decision to issue a debt claim following its failure to pay sums due under a s. 106 agreement. The s.106 had been agreed in 2005, after which West Berks had changed its supplementary planning guidance (“SPG”) on which its calculations were based, leading to lower contributions thereafter. It was argued, among other things, that the charges were unlawful as they were based on erroneous and unreasonable calculations. Ousley J held:
- Is the decision to enforce the agreement unlawful because of the subsequent changes to SPG, the reasons for the changes, or because of changes in circumstances? In my judgment, it is not unlawful. First, the Council is simply seeking to enforce an agreement which was incontestably lawful when entered into. The Claimant could have contested the merits had it wished before an Inspector, so it was not forced to enter the agreement. It did not challenge its lawfulness before starting development; nor at any subsequent stage when payments were due, or when SPG changed, or educational circumstances changed. It did not avail itself of the statutory means of seeking a variation or discharge, and challenging as unlawful any refusal of variation or discharge. The parties could have stipulated for the changes which occurred. It would be very strange if enforcing the agreement were unlawful in those circumstances.
- Second, the lawfulness of enforcing the agreement does not in my view depend on the lawfulness of the calculations or method whereby a sum was put forward by the Council and agreed by the Claimant. The agreement simply contains the specific sums and not a particular method whereby sums are to be calculated. So the basis for the amounts, which is what is said to be unlawful, does not form part of the agreement at all. The sums demanded are lawfully demanded because the Claimant agreed to pay them. The Claimant in any event knew of the SPG, and could see the Topic Papers. It could ask about the method if it did not know. It could appeal against a refusal of permission based on excessive demands.
- Third, no challenge has been brought to the lawfulness of the SPG which underlies the s106 agreement, although a challenge could have been made back in 2005 or 2007. The mere fact that SPG has changed in response to criticisms does not show that the earlier SPG was unlawful. The fact that Inspectors found that the basis of the calculations of contributions led to sums which did not fairly or reasonably relate to the effects of the development, and were therefore contrary to Government policy, does not and could not by itself amount to a finding that the SPG was unlawful. I am not prepared to accept that the Inspectors’ comments show them to be unlawful. Although the calculation methods as explained to me favoured the Council unduly, I am not prepared to hold them unlawful on the limited material I have. SPG had to be changed only because Inspectors would not support it. The contributions sought were characterised in argument as “erroneous or unreasonable”; that does not mean they were unlawful in public law terms.
- Fourth, if the S106 agreement, on its true construction, does require the educational contribution to be paid in changed circumstances where the impact which originally justified its calculation in SPG terms no longer exists, the developer is simply being held to his agreement. Those changed circumstances do not make enforcement unlawful. This moreover invites the Court to rewrite the agreement without going through an available statutory process, judicially reviewable, in which variations can be negotiated and refusals to change the terms justified in law.
(A second issue ventilated in that case regarding planning purposes has been discussed in part 1 of this series).
- It is relatively common for s. 106 agreements to contain some sort of alternative dispute resolution clause – typically one referring disputes to expert determination. A full review of the law on such clauses is beyond the scope of this paper, and s. 106 cases considering them are rare. However, it is worth noting the following points.
- First, as expert determination is an inherently contractual process the precise scope of the clause and the jurisdiction of the expert or the court will vary from case to case. It has been said, however, that underlying the process is the fact that the parties have agreed to be bound by the determination (see e.g. Campbell v Edwards  1 WLR 403 per Lord Denning MR at 407). This raises the interesting question whether an expert determination clause in a unilateral undertaking, to which the local authority did not agree, could bind it on disputes arising under that undertaking. Without reaching a firm conclusion, at first glance there is a reasonable argument that they might not.
- Second, where a matter is to be referred to expert determination the courts will usually decline to decide it, on the basis that parties should be held to the agreements they have made (Barclays Bank plc v Nylon Capital LLP  EWCA Civ 826 ). A particularly clear example of this occurred in Milebush Properties Ltd v Tameside MBC, LB Hillingdon  EWHC 1022 (Ch). There, the Claimant (M) sought a declaration that the first Defendant (T) was obliged to grant it a right of way over a service road pursuant to a s. 106 agreement entered into between T and the Second Defendant (H). The clause required the grant of a right of way “upon such reasonable terms as may be imposed by” the Developer. Questions were raised as to both the construction of the s. 106 agreement and what was reasonable in the circumstances. Arnold J held that the dispute resolution clause was not relevant to the issue between the parties as to the construction of the agreement. However, insofar as any issues involved a question of fact as to what was reasonable, that was a matter that had to be the subject of expert determination (-). This was upheld in the Court of Appeal ( P.T.S.R. 1654, -), which also held that it was not appropriate for a non-contracting party to bring private law proceedings seeking a declaration on the meaning of effect of a planning obligation (-).
- Third, where parties agree that a decision is to be “final and binding”, a claim to a new tribunal that the decision is “wrong” is not available (see, e.g. Jones v Murrell  EWHC 3036 (QB), ).
- Fourth, however, the Court’s jurisdiction to review a decision cannot be totally ousted. A party may still bring a claim that an expert’s report is not binding for, for example, fraud or collusion (Campbell v Edwards  1 WLR 403, 407), or that the expert has departed materially from her instructions (for example, by deciding a question not referred to her or valuing the wrong product) (see Barclays Bank plc v Nylon Capital LLP, -), or exceeded her jurisdiction.
- Arbitration clauses in s. 106 agreements are rarer than those providing for expert determination, so we do not say too much about them. Unlike the purely contractual expert determination, arbitration is governed by the Arbitration Act 1996. The court may be used to facilitate the arbitral process (e.g. unless otherwise agreed an application can be made to the court to enforce peremptory orders of the tribunal, or to determine a preliminary point of law (see ss. 42-45 Arbitration Act 1996) and enforce the award (s. 66). An Arbitral award may be challenged in court for want of jurisdiction (s. 67), serious irregularity (s. 68), and (unless otherwise agreed by the parties) on a point of law (s. 69).